The present invention relates generally to fundraising and contributions for not-for-profit organizations (NPOs), and more specifically to a system and method for enabling a fundraising and contributions program by NPOs using fundraising cards redeemable by NPO supporters for branded stored-value cards for use at specified merchant vendor locations.
Each year, thousands of schools, churches, organizations, associations and other NPOs participate in fundraising programs whereby negotiable gift certificates or cards have identifying means (commonly referred to as “scrip”) are issued at a discount by national and local merchant vendors to NPOs, who then distribute the scrip to NPO supporters at an assigned value and/or at a premium price, the dollar value of the discount being retained by the NPO and/or shared with a third party supplier. Scrip programs are effective as fundraising tools because they generate revenue for NPOs, merchant vendors, and intermediary companies through purchases that NPO supporters would normally make in the ordinary course, i.e., they do not require supplemental expenditures from NPO supporters beyond what would be normal in the course of their everyday spending.
Traditional scrip programs operate via an inventory model whereby NPOs purchase scrip at a discount from the merchant vendors, sell the scrip at the assigned value to the NPO supporters, and retain the difference as fundraising proceeds. The most successful and profitable scrip programs for NPOs are those whereby NPOs stock a “retail store” of branded cards or certificates that a supporter can choose from and purchase on the spot. These programs are successful because there is no lag time between the supporters' payment for and the delivery of the card. The investment necessary, however, to carry an inventory of scrip that encompasses all of their supporters' needs is beyond the scope of most NPO budgets, and therefore relatively few NPOs use this “inventory model.” Rather, roughly 95% of NPOs opt for a more cumbersome 6-step model by which the NPO gathers and consolidates scrip orders and corresponding payments from its supporters, places the orders with a scrip broker, waits for and receives the scrip and, finally, distributes the scrip to its supporters, a process which may take up to four weeks. Only truly committed NPO supporters will consistently participate in these programs. Further, because of their labor-intensive nature, these programs offer a relatively limited array of brands and are often poorly administered or abandoned by NPOs, resulting in loss of the fundraising opportunities.
From the scrip company's point of view, the critical weakness of the traditional model is its razor-thin gross profit margin (approximately 1-2%), which fails to capture potential breakage and float, and difficulty in accurately forecasting inventory needs. In the traditional model, “breakage” (the economic benefit realized when purchased scrip is never or not fully utilized) and “float” (the economic benefit resulting from the passage of time between payment for and redemption of the card) are captured by the merchant vendors and not the scrip company.
More recently, non-scrip fundraising business models have been adopted which allow NPO supporters to make purchases from a wide array of merchant vendors, either online and/or using a traditional credit card, whereby a percentage of the purchase value is paid by the merchant vendor to a designated NPO. These non-scrip programs obviously reduce the administrative burden on the NPOs: the NPOs are, in fact, nearly eliminated from the fundraising process. That advantage, however, is a double-edged sword, because NPO supporters respond more often and more generously to face-to-face sales pitches encouraging on-the-spot acceptance or refusal, especially if the pitches are made at or in the context of specific NPO events or undertakings in which the NPO supporters have personal interests (e.g., parents being asked to purchase scrip to raise funds for their childrens' sporting teams). The abovementioned non-scrip programs are sometimes developed and marketed by intermediate companies charged with administering the programs, where the intermediate company is compensated via a [commission payment] from the merchant vendors. Obviously, there is no potential under these non-scrip models to capture breakage and float.
Finally, the traditional scrip methods do not effectively leverage existing computer and communications technologies to efficiently provide additional NPO customer service solutions via an easily navigable website administered by the scrip company.
The market potential for scrip fundraising is estimated at over $1 billion, yet because no existing model offers both NPOs and scrip companies an efficient and profitable alternative, only about 10,000 of the 800,000 registered NPOs in the United States currently take advantage of this fundraising channel, resulting in a gross under-realization of revenues and limitation of resources for NPOs acting generally in the public interest.